If you're looking to secure third-party funding to expand your business, you may come across unsecured business loans in your research. This is a common way for small business and startup funding to secure loans. As the owner of a burgeoning enterprise or a startup ready to scale, unsecured business financing can help you acquire the capital you need to expand. Unfortunately, as a newer business, some lenders may find your situation too risky and turn down your applications.
Thankfully, there are options. If you do not qualify for a regular business term loan, unsecured business loans could be the solution for you. This type of funding gives many entrepreneurs the opportunity to obtain funding for their endeavors with no collateral required.
Many small business owners find that when it comes time to get a business loan, they cannot get approval for a traditional loan. This can be from their lack of business history, low business credit score, or sometimes lack of assets. Unsecured business financing solves this problem and allows small businesses to secure business funding when they otherwise couldn't.
With an unsecured small business loan, business owners can use their personal credit to secure capital for their businesses. Unsecured small business loans or lines of credit only require the business owner to have a very good personal credit score. This proves they have a history of making payments on time.
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The main difference between secured and unsecured loans is the presence of collateral. The majority of loan terms require a borrower to put up collateral to secure the funding. This is why they are a form of secured loans. In the world of small business, collateral can also include assets such as machinery and equipment.
Unsecured small business loans do not require the business owner to offer up their personal assets by using them as collateral. Instead, unsecured business finance lenders use a business owner's personal credit score to evaluate an applicant.
Wisco Capital aids businesses in securing unsecured business financing with zero hassle.Their approach to financing helps you get the capital you need when you need it most.
There are several types of unsecured small business loans to choose from. It’s important to clearly understand their fundamental differences and how they will impact your business.
If the majority of your revenue comes from credit card or debit card purchases, a merchant cash advance may be an ideal option for you. This is a type of unsecured business line of credit, where the business will receive a lump sum upfront. The loan is repaid by deducting a percentage of your debit and credit card sales. This method repays the loan sale by sale. If you choose this type of unsecured small business loan, you can have the funds removed before they appear in your bank account, or make payments daily or weekly.
Term loans provide businesses with a lump sum of money that you pay back over an agreed-upon period. This type of unsecured small business loan is one of the most straightforward and traditional options, as the monthly payment amount stays consistent over the contracted borrowing time.
This type of unsecured business financing is one of the most flexible options available. It works similarly to a credit card. You’re given an unsecured business line of credit with a maximum amount available for use. However, you're only charged interest on the amount borrowed. Once you get approval for a business line of credit, you can borrow from it over and over again without having to reapply every time.
Invoice financing is a unique form of unsecured business financing. If outstanding invoices are hurting cash flow, you can sell unpaid invoices to a lender at a discounted rate. This is typically done for around 80% of their value. With invoice financing, you get the cash value of the invoices and the lender takes over tracking down the payments.
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Merchant Cash AdvanceBar Restaurant
Line of CreditPPE Wholesale
Unsecured business financing offers startups and other small businesses the opportunity to get funding outside of traditional banks. If you own a business that doesn't have assets for collateral or an established business credit score, an unsecured small business loan could be right for you. As you now know, this type of financing comes with a few potential deterrents like higher interest rates and fees. Take everything into consideration to make sure you make the best decision for your business.
Do you need funding for an immediate emergency or is this for future growth? If it's an emergency, an unsecured business loan can get you funded faster than a secured loan. Make sure to review your finances, check your credit score, and prepare to take on a monthly payment before you apply. Once you've taken a hard look at your needs, determine which unsecured loan type will best suit your situation.
Ready to take the plunge?
If you know unsecured small business financing is the solution for you, fill out our trusted capital partner’s online application in as little as 5 minutes. Still have questions? Drop us a line and one of our representatives will be happy to talk it through with you.